SEC Supports Right of Shareholder to Bring "Short-Swing Profit" Trading Claims

In an amicus curiae brief, the SEC supported the right of a beneficial owner to bring a claim involving short-swing trading.

The SEC argued that beneficial owners of an issuer's securities had standing to bring the suit under Exchange Act Section 16(b) ("Directors, officers, and principal stockholders"). The appeal was from a District Court finding that the plaintiff did not have standing to bring the suit because he failed "to point to or articulate any actual reputation harm" to the issuer from the relevant transaction.

The SEC argued, among other things, that (i) requiring Section 16(b) plaintiffs to demonstrate tangible or reputational harm would subvert Congressional intent, and (ii) Section 16(b) closely resembles a common-law action for breach of a fiduciary duty, which, "irrespective of particular direct harms flowing from the breach [] constitutes a redressable injury-in-fact for purposes of Article III standing."